Background and Motivation of Study

Indonesia as one of the agrarian countries has great potential in the agricultural sector.

In the last five years, the contribution of the agricultural sector to the national economy has become increasingly apparent, with the average contribution of the agricultural sector to GDP reaching 10.26% and growth around 3.90%. The plantation sub-sector is the biggest contributor to the GDP of the agricultural sector. The potential yield of Indonesian plantation production shows positive growth in several types of commodities. The contribution of agricultural gross domestic product (GDP) in 2014 was USD 87.923 million or 10.26% of the national GDP the amount of USD 856.812 million (Ministry of Agriculture Republic of Indonesia, 2015). The potential of plantations and horticulture for five types of commodities with a high enough quantity of production and experiencing relatively positive growth even though it experienced a decline but the following year has increased, therefore Indonesia will increase these commodities for export to trading partners.

Agricultural products have always been a superior trading item in Indonesia. According to the official data, the value of agricultural exports during the period of January through August in 2017 had a surplus with exports reached 22.18 billion US dollars, while the import value was only 11.20 billion dollars (Statistics, 2017). Agricultural exports, including palm oils, and cocoa, represent 22.14 percent of total exports. Although the trade share of contribution to GDP started to decrease in the past decade, the contribution of agricultural trade provides a positive proportion of GDP thereby increasing Indonesia's economic development (Agency, 2017). At the micro level, the opportunities offered by international trade meaningful for agricultural products is not only limited to "traded commodities" but also a source of livelihoods of at least 7 million small farmers in rural areas are still vulnerable to the problem of poverty.

Even though the performance of agricultural exports is quite good, Indonesia still is in a phase that is increasingly difficult to predict. Some of the phenomena that are supposed to be a strong cause of the pressure include a reduced supply of agricultural products as commodities or land competition with other sectors, as well as the uncertainty of the world's ability to meet the food consumption due to climate change is increasingly noticeable. The interaction of supply

and demand shows that the relationship between the increase in the population of Indonesia and the implications of the increase derived demand by increasing consumption of agricultural products, especially food crops, is not matched by an adequate food supply causes an increased risk of food security (Hartati et al., 2015). The rebound international agricultural commodity prices were felt not to be a significant incentive for the acceleration of exports. Thus Indonesia cannot quickly respond to the increase in prices by increasing supply. On the other hand, trade in agricultural products from the import side is also very crucial, especially if linked to the stabilization of prices of agricultural products in Indonesia. Imports of raw materials and auxiliary materials such as agro-industries in the manufacturing sector also deserve attention due to the unavailability of raw materials in the domestic market or availability in inadequate quantities.

Response measures to the agricultural products trade issue usually include the use of non-tariff measures (NTMs), which are policy strategy steps in addition to tariffs which can affect influencing and controlling international trade flows. The contribution of non-tariff barriers to trade barriers in general is greater than the tariff barriers and protection in the agricultural sector is greater than in the manufacturing sector. On average, the protection is predicted to be twice as large, indicating that countries whose export composition depends on agricultural products will tend to experience more severe market access problems than countries that specialize in manufactured products (Fakhrudin, 2008). In implementing non-tariff barriers discussions are held and NTMs imposed from year to year following the agreement between countries. The implementation of non-tariff barriers gives the appearance to indications and thoughts that position these barriers as one of the triggers for the decline in exports of certain commodities of a country (Anggoro & Widyastutik, 2016).

In the context of Indonesia's agricultural trade system, it faced significant challenges due to the global constellation under the shadow of the protectionism trend. The Brexit case and the economic policy of Donald Trump’s administration certainly being some of the indicators.

Meanwhile, according to the G20, its members are responsible for 81% of protectionist measures worldwide in 2015. The G20 also considers that the protectionism that exists today is far beyond the issue of anti-trade rhetoric, but this issue is deeper and the implications for the country's political choice. Besides the action of protectionism, Indonesia is faced with the issue of

increased global trade-restrictive measures, as stated by the World Trade Organization (WTO) (2015) that since the global economic crisis hit in 2008, there has been an increase of trade-restrictive measures. Up until October 2014, a total of 2,146 new trade-trade-restrictive measures 508 actions or 24% of the total action has been removed, leaving 76% of total actions which is as much as 1,638 measures.

In addition, Indonesia now has now joined in trade cooperation with trading partner countries through the Economic Partnership Agreement (EPA), the Free Trade Agreement (FTA), the Comprehensive Economic Partnership Agreement (CEPA), the Comprehensive Economic Cooperation Agreement (CECA), Comprehensive Trade and Economic Partnership (CTEP) and Preferential Tariff Agreement (PTA) due to the fact the country is still facing challenges associated with an increase in market access. As the level of rates in various countries are lowered substantially through a series of bilateral trade negotiations, multilateral, and across the continent, the number and role of various forms of non-tariff trade barriers increase (Salvatore, 2016).

Indonesia has made various efforts to eliminate the impacts of Non-Tariff Measures used by trading partner countries. As the major trading partner countries such as U.S. China, Japan, Australia, always protect their economic interests by using NTMs (Anggoro &

Widyastutik, 2016). Non-tariff barriers have been found to be affecting Indonesia’s cocoa export to the European Union. In addition, Azizah (2015) mentioned that Indonesian crude palm oil (CPO) exports to the European Union in the 2000-2011 period had fluctuated for nearly eleven years due to the same issue. Therefore, this research tries to see what factors influenced the decline in CPO export volume and at the same time also make efforts to safeguard against the national policy. Indonesia actively coordinates with all stakeholders to prepare the position of Indonesia concerning the policies of partner countries that can inhibit access to the Indonesian export market, then deliveries their decision at sessions in the World Trade Organization (WTO) forum and meetings conducted regionally and bilaterally.

The implementation of the NTM policy, Sanitary and Phytosanitary (SPS) and technical barriers to trade (TBT) should be taken into consideration as it usually applies in many countries, for example in Asian, European countries and the US. As indicated by studies concerning the effect of NTM on agricultural exports in China, the European Union, Australia, Japan and the

United States of America (Anggoro & Widyastutik, 2016). Regarding the effect of SPS from the perspective of exporters in China. Since SPS and TBT also apply in the European Union, it is a logical consequence that cocoa and palm oil exporters wishing to enter the European Union market must pay attention to various requirements set by the European Union government. These requirements include quality standards that are usually also associated with environmental, health, safety, labor and business ethics requirements (Azizah, 2015).

Therefore, currently many countries secured their interests by applying standardization as an instrument of carrying out patents trade barriers to protect the interests of their countries.

This phenomenon shows that the current trade has experienced a shift from price-oriented to quality-oriented. Thus, standardization is the main instrument to improve the competitiveness of a nation's products. In addition, each country has a social interest in the products to be consumed both in terms of health (the health of human today and future as well as the health of animals) and safety (safety for consumers, especially children), as well as products that do not damage the environment from the producer side, business interests are prioritized, especially the quality of products that will involve standards and quality (Ministry of Trade Republic of Indonesia, 2012).

At the forum of the WTO multilateral negotiations, in order to lower the index value of the NTM an in depth analysis of the Trade Policy Review (TPR) issued by countries that are major trading partners of Indonesia and requested clarification on the forum Trade Policy Review Mechanism (TPRM) to Indonesia is done, as well as asking for clarifications and imposing objections to the main trading partner countries through Committee and the council in WTO takes place (UNCTAD, 2018).

At the regional negotiating forum, special talks in The Association of Southeast Asian Nations (ASEAN), now routinely conduct discussions on NTM and update bilateral settlement recorded in advance and tidy process at the matrix case in ASEAN and the Non-Tariff Measures (NTMs) are published on the website of the ASEAN Secretariat. The opening of trade through FTA under bilateral and regional trade agreements that increase the number of NTMs in several major countries is designed to protect the domestic company and industry can be negotiated. In the case of ASEAN trade cooperation, the number of NTMs increased from 1,634 to 5,975 in the

period 2000 to 2015 (Ing et al., 2016). And are also believed to be one of the causes of shallow integration in ASEAN.